A year in the life of Zcash (ZEC)

June 13, 2018
Chris Wheal

Zcash (ZEC) – pronounced ‘zee-cash’ – was launched at the end of October 2016 offering high levels of privacy, generating commercial and professional services interest on the back of its ‘zero-knowledge proofs’ promise.

The debut was nothing less than extraordinary, powering to a 3,300 BTC peak on digital currency exchange Poloniex before plummeting to 48 BTC – on the same day.

While much of zcash’s tech is premised on anonymous functionality a tumultuous launch managed to lift clear of ‘dark market’ appeal. Activist coder and zcash boss Zooko Wilcox had insisted from the start that he wanted zcash to be used for financial utility, not speculation.

 Over the past 12 months zcash, despite some massive sector volatility, has proved relatively stable compared to many peers. At the end of the first week of June 2017 ZEC was trading at around $263. Fast forward a year and ZEC trades at $236, a 10% fall. In a sector that is super-turbulent, that’s a show of some resilience.

Zcash icon

Zcash valuations over the year have proved – relative to the crypto asset class – steady: Shutterstock

Crypto 300% surge

By mid June 2017 ZEC had bounced to more than $423. The total market cap for all cryptos had hit more than $100bn compared to 1 April when valuations were a little over $25bn – a 300% hike in two months.

But a month later cryptocurrencies were in freefall with some clear panic selling. ZEC was down to $150 on late afternoon 16 July. Ethereum’s stock price was similarly trashed, down from around $400 to $150.

While the long-term view on cryptos was still more or less positive, concern about a possible bitcoin split was bothering many. Deep unease was all over the media like a rash. 

“The question is,” wrote Izabella Kaminska in the FT on 18 July, “do investors realise the risks they have taken on in the process? And do they appreciate the extent to which the epic valuations being bandied about are liquidity dependent, and so potentially unrealisable?”

No guarantee against compromise

Valuation steadied somewhat through August. But the start of September saw ZEC crest $300, only to slump to under $170 within a fortnight. On 21 September the Zcash company released an audit on its network pre-launch, conducted with cyber security experts NCC Group. The results were solid, Zcash claimed.

“None of this is a guarantee against a compromise,” Zcash said at the time, “and our operational security wasn’t perfect (for example we have no specific knowledge of Google Hangout content confidentiality). It was our best effort given our resources and expertise.”

Security checks at a computer

Zcash came through clean on pre-launch security, it claims: Shutterstock

New Ethereum and UBS support

The previous week Ethereum confirmed it had added Zcash’s zk-SNARK tech in its Metropolis upgrade – a validation of the company’s privacy and audit tech, Zcash claimed.

Another boost for ZEC came at the end of October when South Korea’s Bithumb, the highest volume exchange, added to its roster (Bithumb had recently added Monero and Bitcoin Cash). By the middle of November ZEC had recovered to more than $300.

Yet by early November ZEC was valued at $230. But another pick-up was imminent: within a fortnight the chairman of Swiss bank UBS, Axel Weber, said central banks should create their own digital currencies. Weber was the ex-president of the German Bundesbank – an institution not known for its radical views on anything, least of all cryptos.

“Whilst the official sector very often looks at the risks of these new means of payment, the private sector tends to look at the opportunities they offer,” Weber told the FT.

UBS logo

Digital currencies got a November boost from an unlikely source – UBS: Shutterstock

If central banks were printing their own fiat ‘tokens’, why look down on other QE players, especially new upstarts? Crypto valuations were on the move. Again.

Media glare and ‘mad’ valuations

By the end of November bitcoin broke through the $11,000 barrier and a fortnight later zcash was trading, on 14 December, at $476 – though this was to soar again to more than $660 within a week. A major Fortune magazine spread stuck zcash bang centre stage on 18 December: “Zcash could reshape the financial system in ways Bitcoin couldn’t,” a Fortune strapline gushed.

Privacy, suddenly, was very much on the agenda. “Privacy is a strong requirement,” Wilcox told Fortune gravely. “It’s an absolute showstopper.” Other privacy coins like Monero were also seeing heady valuations as the law enforcement and regulatory mood switched.

But with Bitcoin valuations swinging hard over Christmas and the first fortnight of January, zcash could only follow, despite having hit more than $940 on 7 January.

January was a valuation bloodbath, badly burning many who had leapt in late. By Monday 5 February zcash was down to $304. Toxic blockchain news was all around: the US Commodity Futures Trading Commission, it transpired, had been investigating Bitfinex exchange as well as digital asset Tether after both companies were subpoenaed, Bloomberg claimed.

After another price bump in February zcash continued to slip till early April’s (6th) $179.50 low, despite zcash confirming its Overwinter network protocol release on 2 March (this paved the way for zcash’s biggest 2018 upgrade, Sapling, for September 2018).

In the second week of May 2018 a new paper University College London criticised zcash for potential privacy weakness if zcash was used in a certain, predictable way. 

“In always withdrawing the same amount in the same time intervals, it became possible to distinguish founders withdrawing funds from other users.” 

Zcash boss Zooko Wilcox responded saying an upcoming hard fork would cut privacy risks. Mid May ZEC was valued at close to $380 helped by exchange Gemini confirming it would list zcash. But prices were starting to soften, again. 

US Commodity Futures Trading Commission logo

The US Commodity Futures Trading Commission has a long arm – and justifiable concern: Shutterstock

Japanese anxiety rises

By late May the Japanese Financial Security Agency (FSA) said it would ban cryptocurrencies that supply high levels of anonymity to their users. Traders would have till June 18 to jettison their coins or risk them being converted to yen at market price, the FSA said.

Adding to the unease, Japanese crypto exchange Coincheck said it would delist privacy coins from its trading platform.

Crypto valuations hit a two-month low in the second week of June. According to the Wall Street Journal US regulators were putting pressure on cryptocurrency exchanges to give up trading data on market manipulation concerns on the digital currency’s futures market.

South Korea is unique for sizeable crypto positions from retail investors but hacking stresses hang about: Shutterstock

South Korean cryptocurrency exchange Coinrail, it emerged, had been hacked. The news propelled crypto valuations downwards, again. On 11 June ZEC slipped under $200, down more than -11% while Bitcoin tumbled more than 10% to $6,627.

“The question is: is there any limit to these hacks?” Naeem Aslam at online trading platform ThinkMarkets told the Guardian. “After every few months, we are seeing the same pattern emerging. This is the result of loose regulatory control and regulators must step in to protect the consumers.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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